Freight forwarders continue to face an increasing number of challenges that keep growing as the years go by—the only significant factor is that in 2020 they had to bear the brunt of the COVID-19 pandemic. Profitability in the high-volume, low-margin freight forwarding industry depends on keeping shipments flowing at high levels to achieve efficiencies and economies of scale to cover heavy fixed costs. And freight forwarders that offer innovative online solution offerings in freight matching, customs brokerage, and transportation management are the ones to succeed despite volatilities and will able to navigate the headwinds.
Upamanyu Borah
After the COVID-19 outbreak, India like many other countries implemented lockdowns, which restricted global economic activity. In its turn, the affects can be seen in the freight network industry. Both freight fluidity and demand for freight forwarding services saw significant decreases.
Forwarders play a key role in facilitating the logistics of transportation around the world, and their usual activity has been seriously hampered by the unprecedented situation.
Squeezed by the deepening crisis, freight forwarders are fighting to survive, forcing some to cut staff and break equipment leases while trying to tap high-demand cargo needed to combat the pandemic. Even as oil prices begin to rebound and stabilise, and markets are gradually shifting towards normality, the post-COVID-19 landscape will still present challenges.
There is no doubt that supply chains will recover, but it will take time and the before now ‘unprecedented conditions’ of operators cancelling flights, especially in the wake of a second wave of virus infections, container lines stranded at some of the world’s biggest ports due to congestion – even if uncalled for – is no longer ‘unprecedented’ and is costing once again just as they started to manage the capacity crunch.
IMPROVISING
There has always been risks involved with global trade whether they are political, economic, natural disaster or something entirely different and that’s where the true value of a freight forwarder rest – guiding their clients through such turmoil by identifying the optimal trade lane, mode of transportation, the best rate, securing capacity, and so on.
An air or ocean freight forwarder that wants to position itself as strongly as possible for the recovery, for example, will need to know its own market share and performance against the market for each trade lane and the shift in trade demand. Its responses should be tailored accordingly: where appropriate, it should scale back capacity commitments in hard-hit trade lanes in which it has a large market share but redeploy sales teams to grow market share in resilient trade lanes where its presence is currently small.
Using granular trade-flow modeling, companies can understand their market position and risk exposure in the context of how trade lanes and commodities develop in the crisis. This approach should be combined with macroeconomic scenarios to develop and test strategies for crisis response, as well as next steps after the crisis. Thinking through the most likely scenarios and deducing which shifts in operational and commercial strategy are therefore required will put companies ahead of the curve as we settle through the ‘next normal’.
India’s major forwarder, Jeena & Company gathered detailed information about the impact of coronavirus outbreak on carriers in terms of their capacities, and shared relevant information with customers from time to time to enable them to coordinate with their counterparts and plan their shipments. “Sharing the right information available at the right time will increase the overall awareness to chalk out go-to strategies,” says Cyrus Nariman Katgara, Partner, Jeena & Company.
“No single standard process could be adopted to handle such unexpected obstructions arising out of different mindsets of local administrations operating at different locations. Each incident had to be handled with utmost care to comply with the local as well as national regulatory orders while carefully using the windows for open operational facilitation,” Katgara adds.
“The pandemic gave us a completely new world; lower volumes but bigger challenge to handle them. We are agile and react to every challenge immediately,” expresses SL Sharma, Chairman at the country’s top forwarding company and part of the growing logistics conglomerate— Skyways Group.
“The time taken for execution of each shipment went up manifold. Our operations team had huge challenges on the back of low physical presence of on-ground teams due to the lockdown. Lesser airline capacity meant we could offer lesser solutions for our customers. However, we were quick to step-up to this challenge and until October 2020, we moved 11 charters over a period of 75 days to service our customer’s business and successfully meet their needs,” Sharma continues.
The role of the freight forwarder is evolving, and evolving rapidly. Value-added services such as customs brokerage, consulting, warehousing and more are no longer value-adds but instead expectations from customers. Success will depend on connecting with a larger group of partners, maintaining a multi-national presence and enabling oneself to offer multiple service offerings to customers.
Freight forwarders must find options to remain viable whether that is to focus on a niche solution such as temperature-control service offerings, e-commerce or project logistics or an industry specialisation such as chemicals, pharmaceuticals or mining.
“Overall, we have managed to do record business over the past many months during across all product types, bearing in mind that we have to adjust to the new normal,” says Rajiv Singh, Managing Director at cargo-partner India.
“Our global network had foreseen the challenge of capacity at the very start of the pandemic in January 2020. This helped us to establish regular bi-weekly air freight charter capacity much earlier, giving us some cost and capacity advantage. We partnered with passenger carriers to support the ‘cargo-on-seat’ program, introduced gateway program for exports from India so as to focus on building scale and density, and established multimodal solutions as an alternative for customers to address the rising costs,” he informs.
Well, forwarders, especially today, should look at leveraging technology to navigate the buying and selling terms between manufacturers and importers, as well as provide trusted recommendations. At this time, it should be a chief aim to support the entire ecosystem, so that every player finds the opportunity and means to overcome problems and enjoy success. More than ever, independent freight forwarders need to work together to support the global supply chain.
“COVID-19 pandemic is an unprecedented situation which has forced freight forwarders globally to think and operate differently in order to survive in the industry. Freight forwarding dynamics have changed ever since the outbreak. We need to think about flexibility in adapting situations and working out solutions,” says Afzal Malbarwala, Managing Director, Galaxy Freight.
“As we stabilise basic services, we will likely have to change our targets for innovation and policy. In better co-ordination with airlines, ground handling, trucking, and logistics companies, we can find ways to reduce impediments to normal functioning.”
“We need to put to use the learning and experience we came across during this pandemic to work on strategies to quickly react and solve issues the moment they appear. We need to re-engineer processes to evolve alongside client’s expectations and demands with levels of dynamism,” Malbarwala suggests.
ADAPTING
For centuries forwarders have navigated around world wars, country coupes, natural disasters, nationalisations, dictatorships, currency collapse, draconian regulations, and trade wars. Pandemic supply chain disruption is just one more challenge to the ability of forwarders. However, all these will count on their contingency planning capabilities and their flexibility towards change.
“Freight forwarders need to be informative, fastidious and capable of dealing with different situations. A forwarder has to be flexible so that he can bend but not break—that’s the Mantra,” believes Jaideep Raha, Managing Director, JetexOceanair.
“Customer demands keep changing from time-to-time and freight forwarders has to be extremely cost conscious when it comes to delivering variety of cargo. Flexibility helps a forwarder to meet the unexpected demands and act upon it rather than react to it. He has to quickly adopt changes and be innovative in service delivery- build the best solution to attend to customer needs in a complete and effective way,” he explains.
On a personal note, Sharma remarks, I have seen challenging periods in the past, such as the Gulf War of 1991, 9/11, and now, this pandemic. “The one common tool to be able to fight through these difficult times is ‘effective communication’. A two-way communication channel to know the issues at the other side and also communicating how we would solve them is an important factor. Even in the post-lockdown scenario, we are reaching out to each connected stakeholder and keeping them apprised of available challenges and the solutions worked out to keep their business moving,” Sharma maintains.
“No company can deliver customer satisfaction if it is not fast, dynamic and flexible to find creative or alternative solutions to issues when they arise to keep pace with the ever-growing competition to create new customer experiences,” says Vipin Vohra, Chairman, Continental Carriers.
“Adaptability, agility and alignment along with experience bring operational excellence in logistics real-time ecosystem. IT enabled services are leaving no scope for inefficiency in the logistics sector. It is not only one technology but combinations of technologies bringing in the change within the logistics industry, for a better tomorrow,” he further adds.
As is already happening, change brings with it new opportunities to profit. And with change and opportunity emerges a new set of risks. The velocity at which forwarders have to creatively evolve tempts even the best to act with the Fire-Ready-Aim approach to business.
Freight forwarders and carriers are looking for platforms that seamlessly connect them and continuously innovating to realise the requisites. Meeting the demands of the ‘new normal’, while remaining competitive, calls for smarter ways of working and that’s why AI and cloud logistics solutions for predictive analytics, forecasting and gaining data have become present day vital tools to run the business.
Along this evolution path, we see the emergence of various options that are not necessarily replacing the freight forwarder but perhaps diminishing some the traditional tasks a forwarder is commonly known for — obtaining the best rate, enough capacity and tracking and managing the freight movement from one port or airport to another. As a result and not surprising, freight forwarders are investing in a variety of technologies as well as in value-added services to expand their reach and grow profitably.
Operational efficiency has never been more important. At a time where services can change quickly and may even be suspended or cancelled at short notice, that commitment to delivering quality has become the key determinant more than ever before.
“Versatility will take a forwarder ahead of his competitors to the winning edge,” says Raha. “This can be achieved by cutting down on costs and increasing efficiency in service delivery. Forwarders have to adopt new technologies and act proactively by providing a hassle-free operation to customers and making sure they get the best service. Forecasting of customers expectations and having a thorough knowledge of the product and pricing policy will help to align service with quality.”
“Keeping tab of each and every minute detail and micro-management of business activities is extremely important. Taking stock of the situation on a daily basis can alert forwarders from any disaster that may be lurking around the corner. Routine cost audit and operation optimisation audit are the two basic ingredients. Only way to do so is by way of adopting latest technology and innovative systems integration,” he notes.
At this challenging time, it is equally to be understood by shippers to try and build in longer lead times to their supply chain and explore alternative routings for shipments.
Freight forwarders that have been the quickest to adapt to the challenges have provided robust solutions via chartered passenger aircraft and freighters, alongside sea-air services. In some cases, this has not only protected the supply chain, but is now seen as an essential value-added service in the turbulent months ahead.
CONQUERING
As we reached out to industry experts for their viewpoint, here are the two most important strategies stakeholders had laid out to solve the key problems facing the traditional freight forwarding industry.
Airlines embracing the cargo way
Most airline companies have redesigned their passenger planes to act as cargo planes during this period. This is in a bid to keep their profits high and provide employment to some of their workers. On the same note, more cargo planes and freight operators have now introduced services that cater to small- and medium-sized freight forwarders.
“In general, global air cargo demand is down by roughly 50 per cent year-on-year due to the various economic factors, etc. and India broadly follows the same trend. However, the passenger aircraft international flights have further fallen by upwards of 90 per cent, driving a dramatic collapse in the amount of belly space available for cargo. Hence, this has stimulated many airlines to convert their PAX aircraft to fly cargo in the main cabin as well as in the belly too. IndiGo did this in early April 2020 and now has around ten aircraft which have the necessary equipment to carry ‘cargo-in-cabin’,” says William Boulter, Chief Commercial Officer, IndiGo CarGo.
“While we are the airline of choice for cargo to the Asian and Middle East destinations, our distinguished services have made our customers wanting us to partner with them for newer destinations like Tashkent, Almaty, Bishkek, Moscow and Cairo. These are new sectors which we have won because of the goodwill we generated by successfully building a reliable cargo charter product.”
“Our next focus is to continue supporting our farmers and manufactures in tier II and III cities and sell their produce in international destinations, by offering them thorough connections and tailor-made solutions,” adds Boulter.
“The business disruption gave us an opportunity to adapt and innovate. We were the pioneers in launching ‘cargo-on-seat’ concept. Adapting to the conditions, we also converted our Bombardier Q400 passenger aircraft into cargo carrying freighters,” reveals Sanjiv Gupta, CEO of India’s largest cargo airline— SpiceXpress.
“Contrary to the trend, we witnessed unprecedented growth despite the pandemic as our international business grew manifold during the lockdown. This gave us confidence to expand our reach globally and increase our capacity. Post-lockdown, we inducted wide-body aircrafts into our fleet and managed to do record business over the past many months across domestic and international skies.”
“SpiceXpress have gained good experience in international transportation overtime, especially during the lockdown period. Our experience gives us the confidence to move cargo from India to the UK, Germany, France, Netherlands, Uzbekistan, Kazakhstan, Russia, Turkmenistan, UAE, Saudi Arabia, Thailand, Vietnam, China, Myanmar, Philippines, Indonesia, Japan, Malaysia, Singapore, Cambodia, Canada, Sudan, and many more countries,” Gupta states.
Harnessing technology
Most logistics and freight forwarding companies have now resulted in the IoT-based warehouse management systems, robotics and automation, and AI-powered technology platforms for customer management. Embracing e-freight services have also helped them to offer alternative market routes in a bid to curb the disruption caused by the virus across operations.
“DSV has strong global technology support with a flexible approach to cater to the varying needs of its global client base. Very few companies perfect their flexibility policies right off the bat. It often takes a little trial and error to make the policies work for everyone,” joins Pratul Shekhar, Senior Director- Airfreight- Indian Subcontinent, DSV.
“Implementation of new IT applications— artificial intelligence, and robotic automation solutions for internal and external process has improved operational efficiency in a phenomenal way during these tough times.”
“People and processes are being connected with the latest technology software and IT applications, ensuring all operational functionalities are error free, and in case any issue arises, it’s highlighted and addressed promptly. Also, a lean organisational structure which is followed by DSV helps to maintain a fast and quality decision-making strategy,” he says.
“Digitisation has improved the speed, dynamics and resiliency of our supply chain operations, leading to greater customer responsiveness,” mentions Katgara. “Customers were given the commitment that top management would be available for the operations management teams 24×7 to guide and facilitate resolution of issues that may arise in movement of cargo. Multiple options that were not in use at the time of business as usual were pressed into service to provide the required flexibility that customers wanted and interoperability and manageability when moving their cargo to and from seaports and airports.”
“Management information systems were modified to capture additional relevant information to facilitate quick decision making for realignment of internal resources between different departments, areas of activity, and to accommodate the changing operational requirements. As an added bonus, it helped generate referrals for partners and bring more business, while reducing overutilisation of resources spent on administrative and other time-consuming tasks,” Katgara goes on.
“Freight forwarding operations are the most critical functions. One can have the best procurement processes and sales success, but if operational planning and capability is weak, everything will fall like a house of cards,” says Sharma. “Since coming into operations, Skyways has been creating and implementing cost-effective solutions for its customers. We are constantly working with our airline and vessel partners to bring in improved service levels.”
“We have upgraded our ERP software systems and implemented new analytical tools, enabling the teams to service the business better. Our current ERP and customer engagement tool have hugely benefited us– helped to improve customer experience and increase efficiency and profitability,” he adds.
“Agility is the key to success in an ever-evolving environment. Our teams have full access to systems; they remain always accessible to customers and focuses on speed in response both internally and externally,” says Singh.
“Data integrity, event timeliness, and accuracy are key organisational focus areas, as ‘information’ is the key aspect of how we build transparency and trust with our customers.”
“Our visibility and collaboration platform SPOT allows us to deliver a near real-time tracking capability for air, with a host of other world-class features such as transport order and documents management, purchase order level visibility, messaging and reporting capabilities,” he puts across.
“Responsiveness and innovation in quality and delivery of services are the core aspects of the logistics industry. It becomes important to implement effective logistics management strategies, starting from warehouse operations to the last-mile. Our comprehensive approach towards operational excellence backed by digital investments on customer-facing solutions provides uniform quality procedures and increased customer satisfaction,” adds Vohra.
“We work on a single integrated platform, to avoid any confusion or duplication while managing the various activities across supply chain operations. By doing so, we save time, stay efficient and leave no scope for miscalculation, which ultimately results in effective cost management for our customers and meet long-term business objectives while controlling the cost of doing business,” he avers.
Navigating adversities: The forward stride
At present, carriers, manufacturers, and shippers seem to be a little healthy, in part because there’s been a lot of stimulus money pumped in to the economy. It may be hard to understand because of everything going on with the pandemic, but the fact of the matter is that freight is moving.
At the same time however, unlike before, the post-COVID world is likely to be characterised by flexible value chains, modification in international container transport functions, multiple suppliers and forwarders in the overall drive towards diversification of exposure to risk. This stands to create scope for breaking traditional shipping patterns of reliance on uni-dimensional processes.
Nevertheless, the coronavirus pandemic has highlighted some of the value that freight forwarders bring to their clients.
Continued automation and inclusion in fully-encompassing platforms that manage all modes of transportation and data analytics will dominate freight forwarding in the years ahead. Those that succeed in the forwarding markets of the future will be able to ‘see’ and accurately measure cost and service performance, a trend that will most likely favour smart players.
